Quiz Chapter 3_1 - CHAPTER 3 QUIZ FINANCIAL STATEMENTS CASH...

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Financial statements 1 . Which of the following statements is CORRECT? a. Four key financial statements are the balance sheet, the income statement, the statement of cash flows, and the statement of retained earnings. b. The balance sheet gives us a picture of the firm’s financial situation over a period of time. c. The income statement gives us a snapshot of what is happening at a point in time. d. The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits. Income statement 2 . Which of the following statements is CORRECT? a. The income statement for a given year, say 2005, is designed to give us an idea of how much the firm earned during that year. b. The focal point of the income statement is the cash account, because it cannot be manipulated by “accounting tricks.” c. The reported income of two otherwise identical firms cannot be manipulated by different accounting procedures provided the firms follow Generally Accepted Accounting Principles (GAAP) . d. The reported income of two otherwise identical firms must be identical if the firms are publicly owned, provided they follow standardized procedures as specified by the Securities and Exchange Commission (SEC) .
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